Back in 2006, I wrote something on how Google could be more valuable than MSFT by 2010 given:
a) given its historical growth rate
b) projected growth rate
c) size of paid search today
d) expected growth of paid search by 2010 (40% of online advertising)
e) MSFT’s lack of stock movement
In that analysis I pegged Google’s revenue growth at 70% in 2006 over 2005, apparently, they came in close, but no cigar, at 67%. It’s still a very impressive number. But because I was not alone in expecting more, Google “tumbled” 1.5% after hours.
Google reported Q4 2006 revenue today, announcing revenues of $3.21 billion, an increase of 67% compared to Q4 2005 and an increase of 19% compared to Q3 of 2006. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs, or TAC. In the fourth quarter of 2006, TAC totaled $976 million, or 31% of advertising revenues. $917 million of that was payments to AdSense publishers.
Still freaking impressive.
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WatchMojo NewsletterI postponed penning a business plan for the longest time. I finally put one together this past weekend. It took me 10 hours from start to finish, 37 pages in all, and that also yielded a 6-page executive summary.
Anyway, I was able to bang it out in a weekend cause it was the amalgation of a lot of data, figures and ideas I’ve had and published here over the past 12 months.
I actually added an appendix in our business plan that included a macro and micro level landscape of the industry along with a list of keywords industry types use quite a bit not all investors might recognize at face value (not all types of investors, anyway).
Here is the overview and index, please note this is something I wrote ages ago when I lectured Internet marketing and finance when I was finishing my studies at College, updated sporadically over the years, so it’s not very sophisticated:
I also have quite the Size of Market which summarizes a lot of data from eMarketer, Morgan Stanley, Borrell, Jupiter Research and company in terms of the current size, growth of and the potential market of total advertising, online advertising, paid search, online video advertising, local advertising and classified advertising. I am thinking of just publishing it here for anyone and everyone to use.
Any thoughts?
Anyway, here is Part 1, the index and overview of the landscape, enjoy!
INDEX OF KEYWORDS IN ONLINE ADVERTISING
MACRO – ANALYSIS OF ONLINE ADVERTISING
I) WORLD WIDE WEB: The 3 C’s
1. Content: Websites that write, edit and publish content, either for free or charge for access.
2. Community: Social networking sites that are currently “hot” fall in this category.
3. Commerce: BlueNile.com, Amazon.com, eBay.com (though eBay is largely a Community site with a massive Commercial disposition).
II) CONTENT IS KING
We will mainly examine content sites; how do Content sites make money?
1. E-commerce: selling merchandise, be it t-shirts, books, CDs, jewelry, etc.
2. Database marketing: whereby websites build up email addresses, then either send these offers or resell email addresses to third party marketers. During the early 21st century, anti spam (thankfully) reduced some of the more rogue operators here… today database marketing is making a comeback of sorts
3. Content Licensing: some websites with quality content and brand equity can resell their content to other publishers, but this is largely a very small industry
4. Subscriptions: many websites do not grant free access to their sites, preferring to charge clients. The debate between free content in favor of ad sales vs. paid content in favor of subscriptions is pretty much over, with free content in favor of ad sales prevailing thus far.
5. Online Advertising: a $15 billion industry and growing at a 25-50% growth rate. Online advertising itself can be broken up into many sub-categories.
III) ONLINE ADVERITISING
Websites produce Content to generate traffic and build a Community, in the hopes of generating Commerce.
In our world, publishers control the supply of ad inventory and advertisers demand this supply to promote their products and services.
Oftentimes, demand and supply create a middle market with ad agencies representing advertisers and advertisement sales representations firms representing publishers. This is done mainly because advertisers have core competencies in their fields, and not in advertising, similarly, publishers have core competencies in publishing content and marketing their websites, but not necessarily ad sales.
1. Pricing: CPM, CPC, CPL, CPA
a) CPM: Cost Per Thousand (whereby the M stands for the Roman numeral 1,000)
Advertiser agrees to pay a given CPM rate for every 1,000 impressions served. There is no need for the web surfer to do anything for the publisher to generate revenue. This is beneficial for the publisher but riskiest for the advertiser.
b) CPC: Cost Per Click
Advertiser agrees to pay a given CPC rate for every click generated. A click is simply a web surfer clicking through (note that the Click Through Rate – or CTR – is one of the many guages of performance). There is no need for the web surfer to do anything OTHER than clicking through an ad for the publisher to generate revenue. This is more beneficial to the advertiser than CPM, but it still does not guarantee any result, or outcome to it. The publisher can benefit here, but not as much as it would in the CPM model.
c) CPL: Cost Per Lead
Advertiser agrees to pay a given CPL rate for every lead generated. This model is used by financial companies for example when they want users to enter an email, or apply for a credit card etc. Also travel companies who might want people to actually search for an airline ticket, for example. Analogously, this model is once again more beneficial to the advertiser than the CPM and CPC model. Conversely, this model is less beneficial to the publisher since there are more and more constraints now until the publisher earns revenue.
d) CPA: Cost Per Action (also known as Cost per Sale)
Advertiser agrees to pay a given CPA rate for every sale generated. This is the best model for advertiser and arguably worst for the publisher since a surfer can click away from a site, surf around and not buy anything. It can, for websites with strong “conversions” turn to a very lucrative model.
From 1996-2000, publishers had the leverage and charged high CPMs.
From 2000-2003, advertisers had the leverage and paid CPA and CPC
Google and other search engines have really solidified search marketing through CPC programs
Since 2003, a resurgent online advertising market has led to more and more CPM pricing buys.
Today, advertisers and publishers who understand the other’s objectives and risks will fare better.
2. Marketing Objectives
Different advertisers have different objectives. Realistically, no one really only wants branding. Budgets can evaporate online very quickly so every campaign has some objective or other.
a) Branding: simply increase awareness of brand, rare really, but ideal for publishers.
b) Traffic: a client who wants to drive substantial traffic to a website
c) Leads: emails, applications, etc.
d) Sales: actual sales off a campaign. Very hard for publishers to prove successful.
3. Ad Formats
Rich Media applies to:
- superstitial is the name of ads that “float” on top of a page
- interstitial is the name of ads that appear in between two pages.
- prestitial is the name of ads that appear before a site loads up, these pay most.
Video advertising has hitherto been lumped into the Rich Media category, but increasingly, video advertising is being separated into its own line item. In fact, within video advertising, there is both in-page video advertising and in-stream video advertising. The former represents ads that are in the banner areas alongside the text-content. The latter are ads that are played before the video content, these usually last 3, 5, 10, 15, 30 or 60 seconds. This model is very much in its infancy and it is unclear if such “pre-rolls” (or “post-roll”) advertising formats will prevail.
Pop ups: with pop up blockers and negative consumer feedback, pop ups and pop unders are becoming a thing of the past.
Text Links: text ads which can be sold on CPM and CPC
Traditional banner ads:
Pixel sizes, whereby the first figure is width and the second is height.
Leaderboards: 728×90
Banners: 468×60 (increasingly giving way to 728×90 since these usually sit on the same real estate)
Rectangles / Islands / Boxes / Billboards: 250×250 or 300×250 or 336×280
Skyscrapers: 120×600 or 160×600
Also 300×600 are becoming increasingly popular.
125×125 tiles or buttons are becoming less and less popular.
MICRO – ANALYSIS OF ONLINE ADVERTISING
Online advertising represents a $15 billion industry, set to double to $30 billion by 2010 in the US alone, with a $110 billion target in Asia.
LANDSCAPE
BUY-SIDE
- Advertisers: GM, Gillette, Match.com, Diageo etc.
- Ad Agencies: From digital units of traditional agencies to online-only ones.
INTERMEDIATION
Pure Ad Networks
- Advertising.com
- Blue Lithium
- Fast Click
- Valueclick
- Tribal Fusion
Hybrid Ad Networks
- Max Online
- 24/7 Real Media
SELL-SIDE
- Advertisement Representation Firms (ad reps): Gorilla Nation and Winstar Interactive are two examples.
- Publishers: Any site essentially that creates or aggregates content.
Publishers can further be broken into:
- Top tier publishers: which are essentially top 50 portals, such as Yahoo, MSN, AOL etc
- Second tier publishers: sites with between 10M uniques and up to 100M uniques, such as Marketwatch.com, iVillage.com, IGN, CNET and more. This is not a black and white division, since in many ways, CNET is a top-tier site.
- Third tier publishers: Sites with enough of ad inventory to generate $1M per year in revenue from small, “fringe” advertisers.
Enjoy. Courtesy of Ashkan Karbasfrooshan/HipMojo.com/Mojo Supreme.
Click here for Wireless Entertainment and Mobile Advertising.
If you’re anything like me you try and keep up with good concerts that come through town, but find yourself so busy that you can’t remember when they are, and then end up missing them. It happens to me all the time. If you use iTunes then you’re also like me… and a bajillion other people, but someone has invented a program to solve all of our problems!
iConcertCal is a tiny plug-in for iTunes that gives you an updated, personalized calendar with concerts for the bands from your library penciled in. It even tells you where the band is playing and who they’re playing with! Installation takes about 2 seconds and will provide a lifetime of free organization and planning.
Check it out for yourself: http://www.iconcertcal.com/index.php
This is the kind of stuff I can get behind! Simple, easy and free solution to a constant, nagging problem. Booya.
Source: Stereogum.com
I am looking to begin monetizing our search product, MetaMojo.com. It dawned on me that a nice introduction in the search marketplace/ecosystem where an aggregator essentially taps into:
- Google
- Yahoo!
- any other PPC engines
and essentially parses the top paying CPC results and then returns the top one. Ideally, it would cross-tabulate the CTR of each ad and multiply that by the bidding CPC and the highest yielding one would come on top.
Any ideas?
Life running a start-up is very unique. You have highs, and you have lows. In one day, you ride a rollercoaster of emotions, so just imagine the spectrum of feelings you go through in one year.
Victory is sweet. Maybe it’s so sweet cause it’s not always a certainty.
On the matter, former Green Bay Packer coach Vince Lombardi would say:
“You never win a game unless you beat the guy in front of you. The score on the board doesn’t mean a thing. That’s for the fans.”
That might be true in sports, though the truth is that in that arena, you have a score to determine who wins. In business and life in general, victory is sometimes elusive and oftentimes relative.
At the risk of sounding like The Donald, in life you need to be a fighter and a winner, and frankly, beyond the bravado and swagger, few people are. It’s all talk, an image, mainly, a facade.
I don’t particularly recommend people to go out and say how tough they are, how much of a winner they are; returning to the sports analogy, they should do the talking on the field and let others do the talking. That’s how you create an honorable legacy.
In my primary role as Chief Cheerleader and Motivator, I tell you, I have to walk a fine line between being positive/optimistic and being realistic. But if there is one thing I have learned it’s this: don’t let the bad things in life get you down, and don’t let the good things get to your head.
The ideal is to try to see the forest through the trees and view all potential bad things as the hidden opportunities they actually are; but you need a PhD. from the Tony Robbins school of life to truly believe that.
It’s almost like statistics theory where you basically need to eliminate the outliers on both sides, roll up the sleeves and focus to “beat the guy in front of you,” and Lombardi would say.
I think I understand why some people become successful while others melt down and fizzle out: the winners don’t let anything phase them, they know what it takes to win and deliver when it counts.
I love building and running a startup. In fact, we just turned one and now that contracts come back signed, I sometimes do not even think it’s fair to call ourselves a start-up… but I’ll never stop thinking that we are one when it comes to hustling.
Allright, back to work, enough pontificating.
There’s one email every web entrepreneur likes to get and that is that they have exceeded the amount of traffic/data per month!
Oh yeah, way to start the new year. We’ve already had a very nice start to the year in terms of revenue, so this email was a nice little welcome.
It’s the 30th of the month, mind you, but I am pretty darn sure that it’s the first time that has happened.
I am not surprised though, we’ve streamed more videos this month than ever before… which is a great sign (we also had the most amount of search queries ever, and all of that without spending one penny to market our search engine). We now have some 4,000 videos on the site, which is pretty insane. Weve probably filmed 5,000 so there’s 1,000 just in the pipeline alone; the entire cast and crew of WatchMojo.com deserves a major shout out for that.
This is a big deal, especially since Procter & Gamble let their arch-enemy Unilever take the spot for the TV show. What is more impressive is that Oscar and other live shows are usually DVR/Web-proof.
I guess not.
Read it here.
Fred Wilson is usually right. His track record speaks volumes. He’s right as a VC and as blogger, and his music taste ain’t to shabby either. But once in a while, everyone misses the mark, well, sort of.
I’ve been really busy with the company’s torrid growth thus far in 2007. So I missed quite a bit of the good questions that circulate around the Web. Fred last week posted something on “saying no.” In a nutshell, saying no is an art form, it’s something that we sometimes can’t say, but oftentimes should. My problem with that mindset is that his rationale makes sense for a VC, who gets bombarded a dozen times a week (or day?) with business pitches. In his defense, it should be said, his blog is from the vantage point of a VC, but his audience are probably entrepreneurs and executives, and I hate to say it, but to succeed in business you have to say YES.
In fact, Fred adds:
Startups can go in many directions. There’s always the desire to please the customers. But knowing what you are going to do and focusing on it is so critical. Saying yes might seem like no big deal. It’s only a few lines of code, right? Wrong. It’s never just a few lines of code. So say no as often as you can. It’s counter intuitive to the entrepreneur mindset, but it’s critical.
I could not disagree any more. Mark Cuban used to say that he’d sell a service or product and then go home, read on the topic and worry about delivering it afterwards. It’s somewhat maniacal and can land you in trouble, but isn’t that what entrepreneurship and salesmanship are all about?
I’ve worked with business “leaders” whose favorite words are “no.” After a while, you sort of wonder if their negativity has more to do with their own shortcomings or their conservative, pragmatic nature? Usually it’s the former. Just because they can’t see through the fog, they assume that others can’t either. Trust me, I am not referring to Fred there, but rather, actual executives at places I have worked.
Don’t get me wrong, every smart CEO needs to avoid hubris, and that entails knowing where to draw the line, but if you want to win in business, sports or in life in general, you need a “can do” attitude, and more so that anything else you need a can-do attitude with clients. After all, “sales solves everything” as Cuban would say. Say no to a client, and usually he or she won’t change his mind, he’ll go elsewhere.
When I began my career in sales, I had no experience whatsoever, but a peek at the company’s financials suggested that unless someone in the room grabbed the bull by the horns and sold the company would go broke. I was right, we were a few quarters away from running out of money, and within one quarter of starting to sell (saying yes to the challenge, effectively) we hit profitability and never looked back.
It was not just saying yes to the challenge of selling. It was also knowing what to sell. As a VP of sales for a content site, initially I had no idea if online advertising would be more lucrative than paid subscriptions.
Over time, because consumers spend 25% of their time online but marketers only spend 5% of their budgets online, putting the content out for free and selling ads turned out to be the way to go.
I was given the mandate of ad sales, maybe that was luck and maybe that and only that explains why I went on to sell 75% of the company’s sales. But guess what, had I been given the task of boosting licensing and paid subscriptions, I would have made that work, too. The proof is in the pudding today.
I kept the blinds open. I said yes to all options. As VP of Ad Sales, I cannot tell you the number of times where clients would ask for things that was not on the menu. I found a way to make the company and client win. That is what makes a winner.
In the end, I’d say you only need to say no 20% of the time, 4 times out of 5, you better say yes because otherwise, you are sending your clients to the competition. Clients are just as savvy as you are and they have their own viewpoint and biases as you do, so when a client asks you for something, don’t talk them out of of it. If you feel strongly against something, try to explain why but in the end, it’s their money.
As an investor, it might very well be the opposite: you should say yes 20% of the time (for example). But not in business, and certainly not in sales. All of the cliches in the world apply: “the road less traveled,” “nothing ventured, nothing gained,” etc.
Yahoo! said no to Google.
MSFT said no to the Web, then search.
The list goes on.
As an investor in the stock market, I can tell you that regret is much larger when you don’t take an action. For some odd, strange reason, everytime I have said yes to a stock and it backfired, the regret was surprisingly much lower than when I said no and the darn thing took off. Maybe it’s because usually a stock that is out-of-the-money will invariably get back in the money; who knows. Maybe it’s just me.
All I know is: I will gladly say yes and learn to live with it with minimal regret any day.
If you look back at all of the greatest discoveries and inventions, more often than not, they were discovered / invented through luck.
Bottom line: the only thing you should say no to is presuming that you know the score on the board before the game is played out.
I had missed this altogether, but apparently Carl Icahn has invested “tens of millions of dollars” in HowStuffWorks. HSW was launched by Marshall Brain and is arguably one of the better sites out there, one that, well, does not make the Web look dumb. Of course, when your last name is Brain, you can’t exactly launch HotorNot.com - now can you (though technically, Hot Or Not is a smashing success in itself).
Point is, HSW was eventually acquired by Convex Group, which is Jeff Arnold’s brainchild. Mr. Arnold might not strike a chord with many, but he was the lad behind Web MD. In Fact, Web MD was not even his first success, having sold a medical company for a cool $25M before launching Web MD.
So it is somewhat fitting that Arnold has been aggressively pursuing new opportunities, and when it comes to new ones, China is unlike anything else. Stat for you?
In 2010, online advertising will be a $30 billion industry (eMarketer: $25B, Morgan Stanley: $32B) in the US whereas Asia - powered by China - will be a $110 billion one, according to PWC. Mind you, PWC pegs the US market at $60B… so go figure.
Asia leads all continents in terms of Internet users but the USA is number one when ranking users by country. Of course, the world’s penetration is only 17%, whereas the US is already at 70%
This all might explain why investors have now poured in a whopping $50M in HowStuffWorks’ Chinese venture.
All right, I don’t know what is worst, the fact that Current.tv [looks like they] lost their URL at current.tv or that they lost their URL and no one in the mainstream media, blogosphere, online video watchers or tech sector actually noticed.
I am not sure what Current.tv is, frankly, I know it’s backed by former VP Al Gore. Anyway, I just finished writing a business plan (12 months into operations, mind you) for WatchMojo.com. I realized that I should probably find out what Current.tv is in order to determine whether or not I should include it as a competitor. As a side note, I am of the strong belief that online-only video producers are not competitive at all, and here is my reasoning as to why.
Anyway, so I head over to current.tv and noticed a domain-parked website. Odd. The Alexa ranking of 20,000 or so suggests something is off.
I then venture over to Currenttv.com and indeed, that looks like what I recall Current.tv looking like. The only thing is Currenttv.com has an Alexa ranking of 315,000… hmm…
Maybe I’ve lost my mind and it was always Current.com, so let’s check. All right, that has an Alexa ranking of 640,000; stranger still.
What happened? Did Current.tv take a cue from Al Gore and fall asleep at the wheel? Looks like it. Worst off, why has no one noticed? Man, if there’s one thing worst that a slip up like that is no one actually noticing, or caring.
So I head back to Current.tv, click on the Alexa ranking to see what the screen grab shows:
Yep, that’s the screen grab from Current.tv…
Let’s dig deeper, ah yes, head off to Register.com to see when the URL expires.
Ah yes, some dude forgot to renew the URL. I’ll email him.
Smith Forte (webadmin@currentmedia.com)
+1.4159958200
Fax:
Current TV, LLC
118 King Street
San Francisco, CA 94107
USTechnical Contact:
Todd Holley (webadmin@currentmedia.com)
+1.4159958200
Fax:
Current TV, LLC
118 King Street
San Francisco, CA 94107
USRegistrant Contact:
Smith Forte (webadmin@currentmedia.com)
+1.4159958200
Fax:
Current TV, LLC
118 King Street
San Francisco, CA 94107
USStatus: Locked
Name Servers:
dns1.name-services.com
dns2.name-services.com
dns3.name-services.com
dns4.name-services.com
dns5.name-services.comCreation date: 27 Jan 2005 15:24:02
Expiration date: 27 Jan 2007 15:24:02
Don’t worry, before Al Gore sends those guys to Iraq, remember one thing Big Al: it happens to the best of ‘em: MSFT’s Passport, Google.de, and even, yes, yours truly (though that was not my fault, I swear!)
Maybe I’ll use that Alexa chart, declining slope… but then again, “it’s not a competition, it’s a cooperation.”
